The foreign creditor in bankruptcy proceedings in Spain (2): The communication of credit
According to the bankruptcy regulations in Spain, once the bankruptcy has been declared, the bankruptcy administration must proceed with individual communication of credit to all creditors domiciled abroad, provided this information comes from the debtor’s documentation and information or appears in the proceedings.
The communication of credit should include:
- The identification details of the procedure
- The date of the court order declaring the bankruptcy
- The characteristics of the bankruptcy and the circumstances of the bankrupted company
- Agreements made concerning the powers of administration and disposition over the assets
- Appeal to the creditors and the duty to communicate the credits in due time and form
As a general rule, the communication must be in writing, in Spanish, and individually. Similarly, at their initiative or the request of another party, the relevant court can agree to the publication of the main content of the order declaring the bankruptcy in a foreign State if it is convenient to the interests of the processing.
The communication of credit by the foreign creditor
Both Spanish and foreign creditors have one month from the day following the publication of the declaration in the Spanish Official Gazette to make the communication of credit, regardless of whether or not they receive the individualized communication indicated in the previous section of this article.
In general terms, the communication must be written in Spanish. If it is in another language, the bankruptcy administration may later require the creditor to proceed with the corresponding translation.
The communication of credit by any creditor is voluntary and not obligatory. However, this step is advisable for any debtor to recover any credit, especially regarding the qualification and conditions of the credit by the bankruptcy administration. This entity will base the classification on the information and documentation from creditors and debtors.
Consequences of non-communication or late communication of credit
As long as it is not due to the debtor’s documentation, the main consequence of late communication of credit is its classification as a subordinated credit. It means that, although there is a one-month deadline, creditors may continue to communicate their credits once that period has expired (and until the bankruptcy administration presents the final list of creditors), even if this automatically leads to a subordinate classification.
Once the bankruptcy administration submits the final list of creditors, it is impossible to communicate more credits. Therefore, unless the credit results from the debtor’s documentation and is on the bankruptcy list, the collection will be unattainable in most cases. Even outside the ordinary period of one month, the communication of credit is advisable: because of its inclusion in the list of credits and the possible circumstances of its inclusion (amount, classification, etc.).
The subordinate creditor
As a rule, the classification as either credit or subordinate credit means that it is postponed after all other credits (privileged and ordinary). Its recovery will take place after the satisfaction of all the remaining credits. In practice, this implies the impossibility of recovering the credit in most cases.
Additionally, subordinate credit classification involves:
- Lack of voting rights
- Termination of guarantees and
- Automatic condition on the deductions and acquittals established for ordinary credits by agreement.
José María Mesa & Rosario Rodríguez
For additional information regarding the communication of credit in bankruptcy proceedings,
This article is not considered legal advice